Gamer Growth

The USA has the most gamers, but other countries are growing.

Some interesting information from a survey by Newzoo about gamers in emerging markets. Especially interesting is that two-thirds of gamer spending is online, and passing the retail market in the West for the first time. Growth is swift in emerging markets, especially when payment processing becomes easier; transactions grew over 100% in Russia and 228% in Brazil in 2010, for instance.

It's pretty clear that developing countries will be see explosive smartphone growth, as people there bypass computers and consoles to go directly to Internet-capable phones (and perhaps tablets). Gaming will grow tremendously, but the majority of the growth will be outside the traditional console/computer markets of North America and Europe. Companies and developers that want to catch the growth surge will want to get a firm grip on the smartphone market.

Sony Still Losing Hit Points

Ouch.

Sony is still reeling from the hack attack on the PlayStation Network that exposed 77 million customers to possible theft of their personal information. Sony's not sure if any credit card info was taken, but then there's this story: Supposedly 2.2 million credit card numbers are up for sale on some underground message boards, with sellers claiming to have taken them from Sony. Of course, it's not clear if this is just someone trying to capitalize on the publicity or the actual thieves, but it's not good news for Sony either way.

Now we have an Australian man who had $2000 in charges run up on his credit card, and he thinks Sony is the source for the credit card info. Again, bad news for Sony either way... the PR hits just keep accumulating. Sony's PR efforts have been rather lame at best, with a few blog posts and vague reassurances. Many users are pissed that Sony took so long to figure out there might be a credit card problem, and to reveal facts to users about the breach.

I think it's clear Sony is carefully trying to avoid saying anything that might help a lawsuit against it... and lawyers are already filing class action suits against Sony. But Sony has other problems... like preserving its positive brand name, and trying to get a handle on this issue before E3. The nightmare scenario is that Sony spends its E3 press time talking about the breach rather than new products. Some observers have not been kind regarding Sony's efforts so far, like this one. I think Sony is going to have to step up its efforts in a major way in order to avoid worse effects down the line.

Take some PR lessons from Sony's experience. If you have a major problem, try to get out in front of the story. Communicate a lot. Avoid the passive voice, own up to the problem, explain how you are dealing with it, and tell the customers what you're going to do for them to make it right. Bad things do happen to good companies; but good companies show they can handle it adroitly. So far, Sony looks more like a deer in the headlights than a calm, confident videogame hero about to solve a problem.

Reinventing The Ebook

It's easy to forget sometimes that ebooks aren't just fiction; the nonfiction ebook is also getting very popular. One thing that's struck me, since I first started making ebooks back in 1995 with Acrobat 1.0, is that the technology allows for an ebook to be different than a printed book. Yet very few publishers of ebooks have ever taken advantage of this. Mos publishers of ebooks, being publishers of books, just take the files they have prepared for the printer and save it as a PDF. There; ebook complete, they seem to say.

This reminds me of how television shows were made initially. When television was just coming on the scene in the 1950's, producers of TV shows mostly took their radio broadcast and put a camera in front of it. They then realized they had to pay more attention to what the actors looked like, and there had to be a set since it wasn't being constructed in the audience's mind. But one fixed camera was all they needed... until somebody figured out they could pan, and zoom. And when camera prices got a bit more reasonable, then you could have two cameras.

Fast-forward to today, where you have location shots, handheld cameras, computer graphics seamlessly blended in, splitscreen, fades, wipes, tracking shots... an immense array of techniques to choose from.

With ebooks, we're really at the very beginning of the form. Authors are just starting to realize, even with fiction, the liberating possibilities of the ebook form. Length is no longer regulated by the price of printing each page. Heck, you can put in extra information... scenes that were cut, research information, alternative endings.

For non-fiction ebooks, the possibilities are even more numerous. Audio, video, interactive graphics, examples with links. An example of what can be done is shown in the video above, where Mike Matas shows off what you can do on an iPad with an interactive ebook. His new company Push Pop Press is making software so that other publishers can create works like these.

I hope publishers begin to add more into their non-fiction ebooks. I think RPG rulebooks are a perfect place to add in extras like interactive examples. Heck, even just formatting all the charts so they display properly on different size screens would be nice... But it all takes time, and so far publishers haven't been convinced the market is big enough for an ebook to warrant the time necessary to craft a special ebook edition. Publishers, it's time to recheck your assumptions as the ebook market grows at an incredible rate. The first publishers to do enhanced ebooks may be taking some risk, but they are also well positioned to prosper as the market grows.

Plus, doing an enhanced ebook is a great PR hook right now since it's so rare. The publicity value right now may well pay for the extra effort. It's good marketing, folks.

A tip of the hat to my son Xander Peterson for pointing me towards this TED Talk... good spotting!

44 Billion Apps

Apps... by the billions.

That's how many we will have downloaded by 2016... 44 billion of the little devils. And a good percentage of them, probably the biggest percentage of them, will be games. That's 6 apps or so for every man, woman and child on Earth by 2016. Somebody's gonna be making money.

Yeah, the companies taking 30% of the revenue from each app sold...

Google TV: Ready For Reboot

Google TV... it really is a black box.

Google TV is one of those products that has huge potential... but so far hasn't come close to achieving it. Logitech has been having a rough time selling it, as evidenced by this report: Logitech only managed to sell $5 million worth of Google TV in their last quarter. Not good, especially when they had expected to sell $18 million worth... and they had sold $22 million in the previous quarter.

The product is over-engineered and under-interfaced, from what I can tell. It's complicated and hard to use, not exactly the kind of features you want in a product for consumers. Plus, the early adopters who are the likely buyers right now no doubt heard all about Google's plan to reboot the device, which helped kill sales.

Supposedly Google TV will be getting its upgrade soon, adding in the long-awaited App Store. No word if they will actually revamp the interface so mere mortals can figure it out, but that would be nice. Look, guys, you have some unknown amount of time here to get it fixed, because sooner or later Apple is going to get tired of the Apple TV "hobby" and turn it into a real moneymaker. If any company knows how to build a slick user experience, it's Apple. If they can put some sizzle into the TV screen, they'll own the market. Google needs to get there before Apple to capture some mind share while they refine the interface.

I still expect Apple to make their move before the end of this year. I don't know if this means a new version of Apple TV, but it may have something to do with the rumored introduction of their cloud computing offerings. Most people figure those are aimed at iPhones, and they are right in the near term. But I think Apple is aiming to own the family room too, and all of these initiatives can help them with that market.

Hmmm... I wonder if Amazon will enter the set-top box market, since Android is open to all...

Angry Birds: 140 Million Downloaded

Hey, I took this picture of Angry Birds plush toys, so I can use it as much as I like.

Here's an example of how far a smartphone game can go: Angry Birds has hit 140 million downloads after 16 months on the market. And they are looking to add another 100 million when they hit China hard this year.

So that's 1000 downloads for every dollar they spent on development. Keep that in mind as you listen to people say smartphone games don't make money like console games.

100 Million Free iPhone Games... In March Alone

In-app purchasing is becoming very popular, very fast.

That's the amazing number from a study by Xyologic, which has been combing through App Store data. A full 40% of those titles have in-app purchases. Over 80% of all apps downloaded in March were free apps. Obviously, free-to-play is the wave of the future, right?

Maybe... or maybe not. The dark underside of this wave of free apps is the pay-per-install method of marketing your app. Seems there are lots of places where you can pay a fee per installation to get your app installed in thousands of phones... in order to drive up your numbers so you can appear on Apple's best-seller lists. This can run upwards of $30,000 or so, but the payoff can be considerable; being in the top seller list is about the only way to get noticed in the App Store since Apple's tools are so feeble.

Now Apple is cracking down on apps that offer this cross-marketing opportunity. Which is also shooting down more legitimate cross-marketing efforts. It's really a mess right now, and hopefully Apple will take charge and solve the fundamental problem: App discovery. It should be a warning sign when developers are gaming your system to be able to sell games on your system, if you know what I mean.

Apple may be facing some real retail competition when Amazon really gets rolling selling Android apps (and their own Android tablet... and maybe an Android iPod competitor? Or an Android phone?). Which is exactly why Apple should really be working hard to improve their shopping tools right now.

More Free Android Apps Than iOS

Handy reference for the number of applications on different platforms; original here.

According to Distimo, there are now more free apps for Android (over 134,000 of them) than for iOS (over 121,000). Of course, iOS has many more paid applications than Android (about 3 times as many, in fact). This does go to demonstrate the fact that Android app developers primarily make money from advertising or virtual products (even before official in-app purchasing appears on Android) rather than from app sales.

This makes it harder for developers who'd like to charge for their Android app: Customers are expecting to get their Android apps for free since so many already are free. It's a vicious feedback cycle. Developers can spend their time complaining about the situation, or just realize it is what it is and figure out how to profit from reality.

I recommend the second course of action.

Interestingly, the same report shows that iPad applications are increasing in price over time.

See the larger version here.

The average price paid for an iPad app is over $5... quite a contrast to the iOS apps which struggle to crack $2. Encouraging news for game developers looking to make some money on the iPad, though. Meanwhile, the number of apps featuring in-app purchases has declined. Perhaps because there are more books being put into the iPad?

Nintendo Admits 3DS Sales Disappointing

Not an actual Nintendo ad from TechCrunch. But it should be.

Nintendo has finally admitted what has been obvious to industry observers for some time: 3DS sales have been disappointing. Or rather, they've pretty much slowed to a crawl since the initial launch got all the fanboys to buy one. Now less enthusiastic fans are looking at the hardware, and the price, and the games, and apparently managing to restrain their enthusiasm.

At least Nintendo has figured this out and deigned to admit it. Of course, Iwata-san deflects the blame onto the users, who for some reason just haven't grasped the wonderfulness of the device. At least he's figured out the answer: A marketing campaign to explain the benefits. One wonders why they didn't think of this before. I suspect Nintendo had actually believed all of the enthusiasm expressed by industry types and the press at the last E3, and figured that the 3DS was going to sell itself without the need for spending money on marketing.

Nintendo miscalculated, and badly. Where did they go wrong? I think this is a result of the smartphone/iPod effect that Nintendo has been trying to say has no effect on their business. Quite the opposite is true; smartphones are having a devastating effect on their business. When you can get an iPhone 4 or an iPod Touch for less than the cost of a 3DS, and then have a much more versatile piece of hardware with thousands of low-cost or free games, that's got to affect your sales. Charging $40 for lackluster launch titles hasn't helped, either.

Yes, there are really not too many excellent iPhone games out of the thousands available... but how many 3DS games are there? How many good iPhone games can you get for the price of one 3DS game? About a dozen. Sure, it may look a little different when Nintendo gets some better games out, and the eShop appears... but not significantly. Nintendo still doesn't grasp that they would have to drastically open up their development model, encourage non-gaming applications, and significantly improve the price/performance of their hardware to compete.

Nintendo thought that 3D without glasses was all they needed. Turns out it's more of a gimmick, and not one that's selling hardware for them. They still have to come up with some strategy to sell the 3DS; let's see what they have to say at E3. Although they may be spending most of their time pushing their new console (The Stream? The Wii 2?), which ultimately may meet the same fate as the 3DS. Lots of enthusiasm among the industry execs who hope it will save their fading business models, but when it finally arrives the high price will not be appealing to people playing games on their Google TV and Apple TV. I think we are witnessing the extinction events of the console era.

Nintendo is introducing new models of dinosaur ("Look! Improved scales, bigger teeth, more sheer tonnage!") while newly evolved little mammals are running around eating their eggs and occupying their ecological niches. "Those mammals are so small and scrawny! They'll never amount to anything! How can they possibly threaten us?" To misquote a popular game meme: They're in your base, killing your profits.

Marketing may help delay your extinction, but nothing less than a fundamental shift in your business models will save you, Nintendo.

PlayStation Network Hacked, Outage Continues Indefinitely

Caution: Here There Be Hackers.

Sony finally admitted today that a hacker had broken into their network, and had accessed personal data on the subscribers. That would be 70 million subscribers who now are wondering if their credit card data is being sold on the Russian black market, or in some other shadowy corner of the Internet.

Users were wondering why Sony didn't tell them until after a week of an outage that was only supposed to be a very short-term thing. Sony says they didn't know the information database had been compromised until yesterday. I guess when you've got a database that huge, looking in every corner could take a while.

Anyway, the outage will last for some unknown period of time... perhaps another week. Which is a big disappointment to Playstation owners hoping to do some multiplayer online gaming. Or for developers hoping to make some money selling games over PSN. Losing a couple of weeks of sales could be thousands of dollars lost.

I think it's good for Sony to take its time and make sure everything is totally secure, and I'm sure they're going to be reviewing their security and how this whole thing happened in the first place. I wouldn't want to be the person in charge of IT for this network... not a happy time for them and their team.

It does show the value in diversification... like developers having games on more than one platform so their cash flow doesn't go away for a couple of weeks when there's an outage. Or perhaps Sony may have more than one backup or layer of security in the future.

I bet Microsoft is going around checking the locks on Xbox Live this week to make sure they aren't the next target.

Game Development Costs Triple for NGP, 3DS

Angry Birds plush toys at an open-air market in Seoul, South Korea.
I don't think these were authorized, but I wasn't able to ask.

One of the key "features" of new consoles, handheld or otherwise, is not readily apparent to consumers, but it's very important to developers. New consoles inevitably result in a rise in development costs. It's a consequence of higher resolution graphics, which require more time spent on art, and of the sheer difficulty in learning to use a new console. Not to mention working with a tool set that's inevitably incomplete and bug-ridden. At the earliest stages there are no third-party tools to switch to; you're reliant on the tools the console manufacturer gives you.

More than that, when the console maker throws in new features like 3D or various sensors or motion control, or even added buttons, it all takes time for developers. They have to spend time experimenting with the new features, learning how they work, and hopefully coming up with useful and fun ways to use the features in a game.

How high are we talking about? Game budgets for the 3DS and the NGP are expected to be over $1 million dollars. That's your price of entry... so you can see why a small developer used to iPhone games might balk at the idea. As a contrast, Angry Birds cost $140,000 to develop, and that was considered a very high budget for a smartphone game. Many smartphone games from small developers are costing thousands of dollars to develop, and even then many don't make back their investment. Which is why independent developers need to tread carefully when deciding on budgets for their games.

And clearly, if you are thinking about bringing your smartphone game to the 3DS or the NGP, you'd better have a lot of resources handy... And a great deal of confidence in how many copies you can sell.

Nintendo Makes It Official: "Wii 2" At E3

No, they're not gonna call it the "Wii Wii". Or Wii 2.

Nintendo has, not surprisingly, made the news official: They will be showing their next-generation console at E3. Launch time is listed as 2012, though not before April. This is all not a big surprise given that Nintendo just announced its year-end results, with a 66% drop in profits and a nearly 30% drop in sales. Nintendo claimed the 3DS sold 3.6 million units, which didn't exactly jibe with the numbers reported in different areas, but we'll chalk that up to sell-in rather than sell-thru. Any way you look at it, though, Nintendo failed to make their stated goal of 4 million units for the 3DS.

Nintendo is still playing coy, though Iwata-san did promise "a new approach" to consoles with the new unit. He also admitted that 3D display is not a key feature of the new console, though given that it's fairly easy (and inexpensive) to implement Nintendo will probably put it in there. Apparently the console will be available for play at E3, though who knows what they might be showing off. Nintendo should probably announce a Zelda title for the new console just to get all the fanboys drooling.

Analysts are already starting to fret over whether this new console makes any sense given the fundamental changes sweeping the game industry. Is this an awkward step, just catching up to the competition and not really making a big leap past them? Hard to say until we know more details, but it's true that taking a big power jump past current consoles would mean a higher cost in materials for Nintendo. Which means they either have to price the console up in the $350 plus range, or accept a lower profit margin (or none at all, selling the hardware at a loss initially). Based on Nintendo's past strategies, I doubt they'll sell hardware at a loss.

Another factor is the development costs for third-party publishers. If this new console is going to push more polygons, a reasonable expectation, that means paying more for artwork to show off those polygons. Add in the extra costs of learning new hardware, and you can see game budgets rising even more. Will third parties really embrace higher development costs whole-heartedly? Or will this only encourage them to invest in less-expensive development of social and mobile games?

If Nintendo ends up pricing this new console at $400, or even $350, we could see PS3/Move bundles and Xbox 360/Kinect bundles substantially undercutting Nintendo on price, perhaps by $100 or $150. Which would put the pressure on Nintendo to make the new console worthy of the premium. If OnLive, Apple TV and Google TV are by then bringing low-cost and free games by the thousands to the family room, where does a high-priced console fit in?

One fact remains that often goes unmentioned: Successive generations of graphics improvement are less and less noticeable by a the vast majority of consumers. Hard-core gamers may be able to spot some differences, but that's only a small part of the potential market these days. Expensive hardware that asks for you to spend several hundred dollars more to get a visual improvement most people won't notice is going to be a hard sell.

If Nintendo is smart, they will think hard about how to incorporate all of the advances in game monetization, distribution, pricing, social networking, and marketing into their new console and its online service. That's the real technology Nintendo has to equal or exceed in order to have a successful new console.

Tablet Wars Continue

Real Racing 2 HD lets you race on your iPad 2 with the visuals piped to your TV.

One of the few bits of bad news in Apple's Q2 earnings report was that they sold fewer iPads than they expected, due to the transition to iPad 2. Sales of the original iPad slowed in anticipation of the new device, and then Apple had problems building enough iPad 2's to meet demand. Apple is struggling to overcome the backlog, and it may take months to resolve all the problems.

So when you see a Gartner Group report predicting market share for 2015, it is wise to be skeptical. Really? Apple will get 47.1% market share in 2015? I wonder if they ever include error bars on those predictions... maybe it might really be 47.0% market share. Really, these predictions should be seen as a general look at what the future might hold if trends continue in the current directions without major bumps. But major bumps do occur on a regular basis, and thus predictions will vary wildly from reality at times. What if Apple introduces a new iPad plagued with defects? Market share will drop. What if an Android tablet comes out (say, from Amazon) with a terrific price point and an awesome feature set? Maybe it will steal a big chunk of market share from Apple.

The wise marketer prepares a strategy with some contingency planning in mind to take care of just such events. It's why you should try to diversify your revenue sources among platforms and product lines, as a hedge against the unexpected. If all of your revenue comes from one product on one platform, and then that platform suddenly goes dark for a while, your cash flow dries up. Not a good situation, so plan on how you can avoid it.

Meanwhile, games are the number 1 application for tablets, and we're starting to see some very interesting innovation. Take Real Racing 2 HD from Firemint, for example. This is a slick racing game with some interesting options... like shooting the visuals to your 1080p HDTV (through an AV adapter, or through an Apple TV). YOu get to see your racing on the big screen, and still get useful data on your iPad 2... which you use as a steering wheel, taking advantage of the sensors in the iPad 2. Check out the video:



This sort of title will be hard for a 3DS to compete with. Maybe Sony's NGP will be able to handle this sort of thing, or perhaps Nintendo's new console with the spiffy controller that's rumored can take it on. Meanwhile, we're getting a glimpse of where gaming is headed. Convergence between handheld devices and the family room is happening, leading to some very interesting combinations.

Hey, Microsoft, what do you have? Where's those Windows Phone 7/ Kinect connections you demo'ed? I hope you're planning to bring those to market... and maybe you should think about a tablet operating system someday. Just a thought. I wonder if HP is planning on making gaming important to the future of WebOS as they try to make that a major player in smartphones and tablets. Certainly they haven't shown a presence at GDC... someone should clue them in that gaming is the leading category of applications on smartphones and tablets. It would seem hard to gain traction in either market unless you make some kind of showing in the major application category... better still, have some killer apps in that category. This is one of those cases where marketing is supposed to help inform the product development guys... someone should be writing memos. Or carving the memos into the cubicle walls around the engineers, or sending up signal flares, or something.

Ah, marketing... you have to use those marketing skills in your own organization if you really want to have an impact.

How Much Do App Developers Make?

This chart has all the data...see the original here.

If you guessed "Not a lot, on average," you're right. While Apple in their latest earnings call mentioned that they've paid out over $2 billion to developers, when you analyze the numbers it's less impressive. An interesting analysis by 148apps.biz breaks down the numbers, and they are instructive. With approximately 370,000 apps on iOS from 78,000 publishers, that $2 billion gets spread pretty thin. The average app costs $2.52, which isn't a whole lot.

The numbers work out to about $8500 per publisher per year, which isn't a whole lot. Of course, that's averaging; the publisher with big hits make hundreds of thousands or millions, and many just make a few hundred dollars.

Games are more lucrative than non-game apps, and that's a good thing for game developers. But it underscores just how difficult it is to make money with an iOS game... or any smartphone game, for that matter. Developers need to be aware of the facts before charging into an expensive development process.

More Wii 2 Rumors: "Stream"?

Concept of a Wii 2 controller... looks expensive.

Nintendo is trying very hard to make sure they are the talk of E3, and in a positive way. Normally they try to release very little prior to the show, in order to maximize the impact of announcements at E3. This year, though, we're already seeing a flood of rumors about the successor to the Wii... and it's still April.

The details concern price, availability, and the name of the so-called Wii 2. Sounds like early 2012 is the release time, which makes sense given how long it takes to develop software (assuming that groups have been working on it for a while already). There's a chance it could hit for holiday 2011, but perhaps only in Japan. It would certainly help create a buzz if they only had a relative handful of units available for Christmas, trying to inspire lots of press and people holding onto Christmas money in order to buy a unit in the first quarter.

Pricing that's being floated now is somewhere in the $350 to $400 retail range, which sounds about right if Nintendo is trying to put together hardware that exceeds the capability of the current competition without losing a boatload of money on the new console. A tricky balancing act, to be sure, and so they will probably hold off as long as possible before attaching a price tag in a public way.

The console would be capable of 1080P output, and probably 3D as well. Supposedly the size is about that of an Xbox 360, with the industrial design resembling a modernized Super Nintendo. (Does this mean we can look forward to purple buttons on the case?) Controllers may include a Wii style remote as well as the aforementioned controller with a 6.2 inch HD screen. I suspect there will be a minimal amount of hardware in the box in order to keep costs down, and you'll likely spend more than $100 extra to get the extra controllers you'd want.

Nintendo's new console will really need some killer software if they hope to generate excitement greater than the 3DS. How about a new version of Zelda, in 1080P? That would get a lot of fanboys drooling. Given the rumored price tag, Nintendo has to find ways to appeal to a higher-end audience, which perhaps is why the rumor is going around that Nintendo is in heavy talks for a Grand Theft Auto 5 for the new console. That would certainly change the tone away from Wii Fit.

The name of Nintendo's new console? Rumor has it a leading contender is "Stream". I guess that's what comes after you take a Wii... sorry, sometimes those puns just sneak out. Perhaps it means they will stream movies, or games, or maybe they are just trying to get a little more online pizzazz going. If Nintendo is really serious about boosting digital distribution, they'll want to include a hard drive or some other sort of mass storage option for downloads. That's a huge limiting factor right now in making the Wii a viable platform for downloadable content sales... there's just not room for much.

Meanwhile, the responses from Sony and Microsoft have been unofficial, but pretty much suggesting that 2014 is the earliest they are looking at for coming out with new hardware. Of course, they may change their tune if Nintendo is eroding their market share with their Stream. Right now there must be a great gnashing of teeth and pondering about how to recapture the news momentum at E3. Sony, at least, has the NGP to talk about, and will probably push that hard so you don't think too much about a new console to replace the PS3. What's Microsoft got? Good question...

Amazon's Tablet

I don't think Secret Squirrel is the official name, but the graphic was too cool to resist.

The nuggets of rumor are washing down from the hills of speculation in the upper Amazon... It looks like Amazon is indeed planning to introduce an Android-based tablet, to be built by Samsung. The idea is to have a tablet with Amazon goods and services built in, so that it's easy to grab your Amazon music, your Amazon Instant Video, and of course your ebooks. Amazon has already set up a cloud-based music service, and the new Amazon App store for Android apps... so it's pretty clear that they are getting ready for an Android tablet.

Of course, Amazon has been watching the success of the iPad with no little degree of envy. There's still plenty of room for Kindle at the bottom of the price range, of course, until Apple feels motivated to introduce a lower-priced iPad (which won't happen for quite a while, until Apple really feels threatened by lower-priced and more effective competition, which isn't anywhere near arriving yet). It makes sense for Amazon to have an answer to Apple at the high end. These two giants are competing quite strongly, selling music and video and books and apps... and Amazon has some distinct advantages in knowing how to really cross-sell items. When you look at something on Amazon, you get a wealth of information: Trustworthy user reviews, "users who looked at this also looked at" information, wish lists... there's a huge array of very helpful info towards making your purchase decision. Compare that to the iTunes store, which is starkly devoid of helpful info when you're looking for an App.

I expect Amazon will have this out in time for the holiday season, if not before. It will be interesting to see just how aggressive they get with price point ($249?) and specs... I'd expect a 7-inch tablet, but they may go for a 10-incher and take on the iPad directly.

Ah, 2011, you are just full of interesting battles...

Steam Keeping Quiet

Valve prepares to repel number-seekers.

Steam is the leading digital distributor of games, but the only way we know that is pretty much because they say so. Because they don't release any sales numbers except to the companies whose products they sell, and apparently this isn't gonna change any time soon. According to this article, Valve is not interested in turning over information on sales to NPD, which would dearly love to have some actual numbers to put into their estimates of how much revenue is being generated by digital distribution, freemium, and other monetization methods.

If NPD is not getting numbers from Steam, it certainly makes their numbers for non-retail sales rather vaporous. Then again, we should have known this already... NPD assembles a lot of guesses about non-traditional game revenue numbers, because hard numbers are not being released. I just hope nobody puts too much credence in the numbers NPD puts out...

Meanwhile, as the comments section on this Gamasutra article make clear, Valve is hurting game developers by refusing to provide data. Sales data could be enormously helpful to developers trying to figure out if they have a huge market available to them or not, and how well their game is selling relative to that market. Further, if you can have independent numbers on sales to point to, this is extremely important in getting financing. People who might lend you money kind of like to have some idea if they will get paid back.

I realize Valve may not want to release their numbers directly, but providing them to NPD is a way to get them out to the world with NPD filing off the serial numbers so they can't be directly attached to Steam. Right now Valve is showing they don't really care to help small developers. Maybe they are forgetting that's where they were once upon a time.

B&N Making Nook Into a Tablet

It's an e-reader, a tablet, and maybe a dessert topping.

When is an e-reader a tablet? When Barnes & Noble decides it can become one... they are letting developers submit applications for their color Nook e-reader, the Android-based device that hackers had already been transforming into a full-fledged tablet for some time.

Sure, it's not the speediest Android tablet out there, not by a long shot. But $249 for a 7-inch Android tablet is not a bad price at all. I think B&N has heard the rumors about Amazon developing an Android tablet, and decided to beat them to the punch.

So the ebook reader and the game playing tablet markets are beginning to collide in more interesting ways.  I think this is a good move for B&N, if they go for it whole-heartedly. Aside from Apple, nobody's a clear winner in the tablet market yet. Go on, sell a zillion Nooks! It'll be fun to see how Amazon responds.

Worst moments in videogame marketing

Nokia thought this was a cool way to introduce their price point. Not.

Here's an excellent roundup of some of the most embarrassing moments in videogame marketing. Some of the winners include Nokia's launch of the ill-fated N-gage gaming phone, the infamous Daikatana ad where John Romero proclaims he's about to make you his bitch, and the wonderful Sony ad for the PSP where they managed to set back race relations a few years. It's worth a look, so you can see what not to do when you market your games.

How do you avoid getting your product and company on a list of the Worst Marketing in years to come? You may have a clever idea, or your marketing person may think it's brilliant, but it's always good to get a reality check, especially when you hear the words "edgy" or "bold" used to describe it. Show the marketing to some outsiders... people who aren't in the business, aren't hipsters, aren't too cool for words. Like your mom, or the next-door neighbor. See what they think. Remember, not everyone who will see your marketing is going to "get" the deeper layers of nuance you think are obvious. Some will just see the surface... and if they are repelled, your marketing is not having the proper effect.

Apple's Huge Q2

I believe this is made out of platinum, given their sales numbers.

Once again, Apple beat its own estimates and analyst guesses for a stellar $24.67 billion in revenue for Q2. More than half of their revenue came from the iPhone and related products... they sold 18.6 million iPhones in the quarter, up 113% over last year's Q2. The one thing that held them back was an inability to produce enough iPads to meet demand, and the backlog on the iPad 2 is monstrous, according to Apple.

In other Apple news, they've sued Samsung for patent infringement because of the Galaxy Tab and the Galaxy S products. Interestingly, in the legal filing we find out that Apple has sold 187 million iOS devices as of March 2011... 19 million iPads, 60 million iPod Touches, and 108 million iPhones so far. For comparison purposes, the Nintendo DS line has sold 144 million units and the PSP line has sold 62 million units. The iPhone should pass up the DS line this year, and so should Android phones, in total units sold.

The iTunes store is now bringing in $1.4 billion per quarter... not a bad little business.

The rumor mill is now saying not to expect too much from the iPhone 5... new processor (the A5), better camera, maybe a few other tweaks... and it won't hit until September. I think that may well be true, but the real story is going to be how Apple attacks the lower price point end of the market. So far, Android phones have mostly been at the high end in iPhone price territory. But we're starting to see pretty nice smartphones based on Android coming down into the $100 price range, without a contract. This spells trouble for Apple unless it can respond.

Sure, they keep selling older models of the iPhone at lower prices, but there's a significant difference in horsepower between an iPhone 3G and an iPhone 4... not to mention an iPhone 5. Looking at what Apple did with the iPod line over time may be a clue as to how they will approach the issue of extending the iPhone line. They came up with ways to cost-reduce the product, make it smaller and reduce the feature set to the core features. So I will expect them to come up with some smaller, sleeker iPhone models to hit lower price points, and eventually cover a full range of phone prices.

Which, in turn, will mean more variations for developers to support... but a larger market overall.

Ebook Sales Triple

Ebook sales have tripled since last year, and the trend shows no sign of slowing down,  comparing January-February sales to last year's. It looks like the wave of ereaders and tablets sold over Christmas resulted, not too surprisingly, in a wave of ebooks sold in the first quarter. With tablet sales alone expect to be triple sales of last year, not to mention how many e-readers will be sold (and smartphones!), you can expect ebook sales to continue their headlong growth.

At the same time, paper book sales are declining, helped along (no doubt) by the closure of many bookstores. Not just a little; adult books dropped 34%, while children's books dropped 16%. No wonder bookstores are hurting. I think it's pretty clear readers are switching to ebooks as fast as they can.

Not without some hitches, though. As this case shows, when the Hachette Group decided to price Michael Connelly's latest best-seller The Fifth Witness at $14.99 for the e-book... and it was selling for $14.28 on Amazon as a hardcover. Not surprisingly, Amazon reviewers savaged it for the pricing, giving it a slew of one-star reviews. The ebook price later dropped to $12.99... but it still shows a stunning disregard for reality. It sure reminds me of the cluelessness of the music industry, which was still trying to sell CD's for $18 when people could buy the tracks for 99 cents. How's that working out for the music industry? About as well as it's working out for the book industry, which is to say not well at all.

Savvy authors who are self-publishing are making a mint with ebooks priced at $4.99 or $2.99 or even 99 cents. There's no sure bet on pricing, except that readers aren't dummies and realize that an ebook should cost less than a printed book. So if paperbacks are $9 or $10, readers expect an ebook for a lot less. And hey, they might even buy more books... or be more likely to take a flyer on an author they don't know, or a genre they haven't tried.

OK, but printed books still have advantages... like you can get one autographed. Can't do that with an ebook, right? Maybe, but not for long. A new company promises to provide a way for authors to sign ebooks... and authors can do book signings from the comfort of their own homes, and even put pictures into the signature of themselves with their fans. That's going to be really cool when it arrives... a terrific tool for self-publishing authors.

I'm sure the book publishing industry will figure all this out someday... maybe a few years after the industry collapses.

Internet Access Worldwide

You'll notice that the US is not the top rank on either axis.

The above chart shows the percentage of Internet access for the population of various countries on the vertical axis. The horizontal axis shows the Internet Freedom score, which is a rough measure of just how much people in that country can go to any site they wish on the Internet. Of course, this is designed to showcase how repressive some governments are when it comes to allowing Internet freedom, or just how few people in a country have Internet access for various reasons which may range from cultural to economic to geographic.

There are some interesting implications here for the gaming market, though. China still has less than 40% penetration of the Internet, and despite that is poised to become a larger game market than the USA in a couple of years. On my recent trip to China, I was struck by the sheer lack of computer or video games being sold anywhere (except for Hong Kong, which doesn't exactly count). China's game market is mostly online gaming, and I suspect that will be true for a long time... or maybe forever. Which means that despite its already large size, the Chinese market could easily double in size just by increasing Internet penetration.

Similarly, Brazil has a lot of potential... and India has an incredible amount. I think the odds are good that these countries (and others in the developing world) will just skip by the whole concept of buying expensive packaged games in retail stores for consoles or computers. They'll go straight to digital distribution, and free-to-play games. Smartphones will be the first and only computer for billions of people worldwide, so if you really want to be part of the future of the game industry, digital distribution and smartphone games are where you need to be. Oh, and lower prices, too.

Amazing how that one chart can show you the future of the game industry, if you know how to read it.

Natural App Discovery

Another way to find apps, rather than trying your luck in the App Store.

A new startup, Quixey, has a new way to find apps, using a functional search engine that takes your query and returns app recommendations from multiple platforms. It lets you use natural language queries, so it's quite user-friendly. This startup will debut next month, but if you head to their site you can request a beta invite. I can only hope that we get more and better tools for finding apps, especially games. I'm still appalled at how hard it is to find a game you like in the App Store, and as for the Android Market... let's hope Amazon's take on it works better.

Wii 2: Rumor Roundup

I'm pretty sure the new console from Nintendo will not look like this.

An amazing amount of info is now bubbling forth about the new console (the Wii 2? Wii HD? probably some new name entirely) from Nintendo. A suspicious sort of person might wonder if all this isn't appearing with the tacit or even explicit permission of Nintendo, while preserving their complete deniability. It's an old game in the tech business, and it's played masterfully in the gaming business. The combination of numerous press outlets (web sites, these days), and a huge fan base of die-hard gamers make rumors about new games and especially new gaming hardware irresistible. It's an especially convenient way for a company to generate a lot of press, and see what sort of reception proposed products generate, before actually going on the record as planning to produce something.

Big game developers are very good about keeping to their non-disclosure agreements, and generally don't leak very much info at all. If they were to let slip with some info, you can bet Nintendo (or Sony or Microsoft) would punish them... and when you have a chance to ship a launch title for a new platform, which could be an easy path to a million-plus unit seller, you don't want to mess that up. Hence, very little info about new hardware leaks out. Unless the company who created the hardware wants the info leaked... which is when you start seeing the rumors.

In this case, with rumors from multiple sources, it's pretty clear to me that this was orchestrated by Nintendo. It's not a coincidence it comes on the heels of a flawed 3DS launch; this is an excellent way for Nintendo to change the conversation and get some positive buzz before E3. Certainly they've been working on new hardware for years, but probably got serious last year as Wii sales started heading south. Now it's clearly time, or maybe a little past time, to get a new console out there for Nintendo.

What are some of the specifics about the Wii 2? Glad you asked, because I've scoured the web for some data. The Wii 2 will certainly try for feeds and speeds superior to the Xbox 360 and the PS3, though of course there will be plenty of argument about who's fastest at a particular task. The Wii 2 should sport a PowerPC CPU with at least 3 cores, probably a higher clock speed than current consoles, an ATI GPU from the R700 line (one of their latest and greatest). and 512 MB of RAM. The CPU and GPU are probably custom-modified for Nintendo, as has been their practice in the past, to optimize certain functions Nintendo deems important.

The controllers will apparently be a key part of Nintendo's strategy, as they try to innovate here to set themselves apart from other consoles. There will be a 6 inch HD touchscreen on the controller, and the controller will function as a Wii sensor bar for backwards compatibility. The controller will also have a camera, a D-pad, 2 bumpers, 2 triggers... and possibly other functions as well (a microphone is cheap, as are some sensors for orientation... rumble capability, too, I bet). The screen may have touch control, and you could have the ability to stream games to the controller. It's supposed to have better motion control sensing than the Move.

It makes sense to beef up the controller functions, as this is an area where there hasn't been much work for a long time. Certainly the DS design showed the utility of having a second, touch-capable screen handy in game designs. Even handier when you can get information that is kept secret from other players; useful for play-picking in sports games, of course, but there will be other uses, too.

Developers have had units for months, according to the rumors, so these features look to be pretty solid. Of course, Nintendo can feel free to change any or all of these specs since they have not officially said anything yet. I'd expect some changes from these specs before product actually ships. When will that be? It's barely possible they could ship by Christmas, but it seems to be rushing it if they expect to have some really good software available at launch. Perhaps a Japanese launch at Christmas, and then the USA/Europe in springtime might be doable. That's my speculation, but of course actual manufacturing , design schedules and software will affect the timing. Price? This sounds like it will be fairly expensive to me; I wouldn't be too startled to see $499, though $399 is more likely. If Nintendo really wanted to give Microsoft and Sony fits, they'd roll out at $299, but I doubt that will happen.

Speaking of price, the Wii price drop hits a little earlier than expected; major stores like Target and Toys R Us now have the Wii at $169.99. Nintendo has finally joined us in reality, and decided to lower the price of the Wii; the rumor mill says the price will fall to $149.99 in mid-May, in an effort to make E3 even more shiny for Nintendo.

Now we'll have to wait and see how Microsoft and Sony respond. They would really love to avoid putting out a new console, having gotten the current generation to a nice profitability. I expect them to react by cutting prices prior to the holiday season, and perhaps bundling software, and maybe getting more aggressive on pricing for their motion-control hardware Kinect and Move (and the bundles including them). They won't put out a new console until Nintendo really forces their hand. A lot can happen before Nintendo actually gets a new console on the market and it starts taking measurable market share from Sony or Microsoft. Why react too fast? Wait a while to see how things shake out, and meanwhile have the engineers working on new hardware for when you really need to introduce it. Perhaps announce in 2012, and ship in 2013... or 2014... that would be better for Sony or Microsoft. But Nintendo will be trying like hell to force their hands.

It will be an interesting E3...

A New Way To Monetize Mobile Games

There's a new business model making its way to mobile games, spearheaded by a startup named Kiip (pronounced "Keep"). It's a clever fusion of game design and advertising: When you get an achievement in the game, you get an actual reward like a coupon for a free smoothie or some other product from one of their sponsors. The plan is to connect various games with sponsors, and provide rewards linked to the gameplay and to the demographics of the users.

Kiip: An Introduction from kiip on Vimeo.

Kiip is complementary to other ad models, as they plan to focus on rewards and stay away from banner ads and other forms of advertising. The targeting is a crucial element; their system won't be offering a free lipstick to a game where the demographics don't include females.

It's an interesting concept, and I'll be keeping an eye on Kiip to see how users and advertisers respond to it.

If Facebook Goes To China, Games Would Win

Or tried to play Homefront.

One of the interesting things about China is the Great Firewall, which is the term for the Chinese government's efforts to block access to sites they consider subversive or bad for some reason. This includes such sites as Google and Twitter, and of course, Facebook. I experienced this first-hand while voyaging across China last month; it was odd and annoying to be denied access to social networking. Fortunately, once I boarded our cruise ship and used the satellite uplink, the Great Firewall was neatly circumvented. I'm sure tens of millions of Chinese would like to do that, too, but the government won't allow it.

Of course Facebook has been trying to get into the Chinese market, but China simply won't allow it. They are too wary of Facebook being used as an anti-government tool. China is in the midst of a crackdown on suspected activists and anti-government behavior, triggered by their fears that what's happening in the Middle East might spread to China. So it would seem like a difficult task to convince the government to allow in a social network being used in other countries as a way for people to communicate about their shared dislike of their government.

Still, word is that Facebook is looking for ways to make a deal with the Chinese. This would no doubt involve making big concessions to the Chinese government about access to information on people. No doubt, the Chinese government would want to be able to get full information about any Facebook user in China. This sort of data access is what led Google to abandon the Chinese market directly and move their site to Hong Kong, which though nominally ruled by China still has a great deal of autonomy. Will Facebook take a high moral stance, or will the lure of the enormous Chinese market be too much for them?

Assuming that Facebook is able to eventually cut a deal for access to China, what would this mean for games? China is obviously a huge market for games... it's set to top $8 billion in revenue by 2014, according to this study. That would make China 25% of the total game industry in 2014... and the US would only be at 22%. Ouch. As a point of information, Tencent took in $1.4 billion in revenue in 2010, followed by Netease at $749 million, Shanda Games at $680 million, and Perfect World at $374 million. They are all growing rapidly, too.

Facebook in China might change this dynamic; certainly it would affect Chinese gaming companies, who would be looking at having to adapt to a new platform or face some erosion of market share. This could open up huge new revenue streams for companies like Zynga, who have Facebook games that would likely be very popular in China. (Farming? Gambling? Yeah, those would do well... remember Farmville is huge in Asian countries that allow Facebook to operate.)

Even smaller developers who were able to quickly translate their games could see a big benefit. Facebook could see massive growth in China, and games would doubtless be a top usage of the platform. Keep that in mind as you build your social game titles; keep all those text strings in easy-to-find places in the code.

Slick Marketing for Portal 2

First time I've seen a billboard campaign for a videogame.

Valve is pulling out all the stops for Portal 2. Not only have the put a billboard campaign in place (with multiple billboards, not just in Silicon Valley), they have come up with a very clever scheme to both sell a lot of games and hype interest in Portal 2. It's a variant on hostage publishing, which is where you hold off on publishing a product until you have enough pledges to make it worth your while. In this case, Valve is selling a group of 13 indie games on Steam called The Potato Sack at 75% off (it's $38.72, a pretty good deal for 13 cool games). You get not only the 13 games, but a potato hat in Team Fortress and a special skin Portal 2 co-op play. The promotional price is only good until Portal 2 launches.

But here's the best part: If you buy The Potato Sack and play the games, you can speed up the release of Portal 2... but only if enough people buy it and play it. Brilliant marketing idea, guys. My potato hat's off to you. Make money selling a group of games and use that to help spread the word about an upcoming title and boost its sales, too. Talk about marketing that makes money... this is the kind of clever marketing we should see more of. Creativity in marketing is rarer than creativity in game design, and that's not all that common.

Take a tip from this marketing campaign and put some creative energy into your marketing.

(Hat tip to Greg Peterson for pointing out this marketing campaign to me...)

Update: Well, perhaps not everyone is as taken with this marketing campaign as I am. According to this post on IndustryGamers, there have been a number people dissatisfied with the campaign, as they thought just buying the games would lead to an early release, not realizing the games would have to be played. That's a good complaint if the actual phrasing was unclear; I'd have to go and look at it to see for myself. Still, I think the campaign idea is a good one, even if the execution was flawed.

Book Publishers Becoming Irrelevant?

Ouch.

A great post on GigaOm from the London Book Fair, where a panel was held to debate the question of "Authors and readers are all that matter. Publishers will become irrelevant." As you might expect from the venue, the audience voted for the publishers to continue to be relevant. I think publishers will have some relevance, but not the same sort they hold today.

Publishers have to find new ways to add value, or to justify the percentage they take from authors. Or perhaps alter the percentages. Authors are now free to publish their own works, and some are making a damn good living at it (Joe Konrath looks to bring in well north of $500,000 this year... I'd call that pretty damn good). Yes, that means authors have to deal with finding someone to edit their books, format them, create a cover, write blurb copy, upload the book to all the different services, create and execute a marketing plan, and spend a lot of time marketing their books and keeping track of all the details of accounting and the various fiddly things to deal with the online book publishers like Amazon and Lulu and Smashwords and others.

Some authors are capable of dealing with some or all of that easily. Some don't want to deal with any of it. Services exist to provide all of those things for a flat rate, so authors can line up any of those things they don't want to deal with directly. (Which still means selecting a vendor and managing them, which some authors don't seem comfortable with doing.) When an author can do it all themselves, and reap a 70% royalty instead of about 10%, publishers now have to show why their much lower royalty rates are in fact a good deal for the authors.

I don't think any publishers will really be able to do that. Publishers will have to boost their royalty rates (on e-books at least) and change many of the annoying things about their business (like taking 18 months from getting a manuscript to release of a book) in order to get authors to sign with them.

Really, what ebooks and digital distribution have done is expose all the weaknesses of the old publishing model. The whole concept that more than half of all the books printed end up getting returned and pulped shows massive inefficiency. Which leaves room for a much more efficient model to transform the industry, which is occurring right now.

E-readers will only get cheaper, better, and more prevalent. As tablet computing spreads with amazing speed (1 billion tablets by 2014), ebooks will become the main source of book revenue. Specialty books, such as fine editions of novels or art books for the coffee table, will continue on. But mass-market paperbacks will never again hold the prevalence they have in the past.

Will there be a lot of crap? Oh, yeah. But the good stuff will find an audience. Marketing will be important, but I think it's more about getting your good work known more quickly than it would without marketing. If you write a really great novel, people will find it and talk about it and it'll get known eventually. Marketing won't magically transform hackwork into brilliance; what good marketing will do is help your work reach its market potential more swiftly.

Traditional Videogame Sales Continue Decline

No, I don't know what this has to do with March game sales, , but it showed up
when I did an image search for March 2011 game sales. Go figure.

March numbers are in, and once again we return to the old story: Total sales of hardware and software in retail stores dropped 4% in March, marking the third straight year of declines. Software dropped 16%, while hardware grew 12% and accessories grew 13%. Don't you think it would constitute a trend by now? Yet some executives continue to make public statements that the traditional business is strong. Activision, for one, doesn't seem interested in digital distribution or social gaming or anything other than getting out more retail boxed goods. At least EA is making a strong effort to move into new business areas; their stock price has suffered for it, but at least as the transition continues they are positioning themselves to take advantage of it.

It makes me wonder just how relevant new console introductions are. With things like OnLive being built into TV sets, and Google TV and Apple TV (also likely to be built into TV sets), the era of the single-purpose device for games and games only is coming to an end. The inexorable progress of Moore's Law has provided ample CPU power at a low price to enable pretty good game output in very inexpensive hardware. Social gaming has shown new monetization models, and digital distribution has opened the floodgates to content. The combination of these trends is putting a fierce squeeze on the traditional business, and we're seeing that reflected in the numbers.

Even the current generation of consoles have become aware of this. All three have other capabilities than just playing games; you can watch movies or TV shows (via Netflix), play music, show pictures, and other functions. All three allow some form of digital distribution, albeit tightly controlled. Free-to-play games are heading to the PS3 and likely the Xbox 360, as the new monetization model also spreads there.

The logical extension is the Apple/Google TV direction: low cost or invisible hardware (built into the TV) that provides a huge range of games, many free or ad-supported, with many other types of apps available. The whole app market model has proven enormously successful, and is driving the tablet market and will soon come to the TV to transform the family room. In the process it will upend the gaming market. I fear companies that have not realized this will be facing a very difficult time, and that includes Nintendo, who has traditionally been very far behind in their online efforts.

3DS Sales Lower Than We Thought

"C'mon, Luigi, we gotta get outa here before sales collapse-a completely!"

Nintendo finally announced 3DS sales in the US for its March opening... 400,000 units, which was less than the low end of analyst estimates (which were 500,000 to 750,000). This means the 3DS saw a grand total of just over 1.5 million units in sales from launch in Japan to the end of March (which then included US and European sales), against their forecast of 4 million units. They hit about 40% of their forecast numbers, in other words. You can argue about sell-in predictions versus sell-thru numbers, but the truth is Nintendo would rather have had empty store shelves at the end of the weekend with customers hungrily demanding more. Product shortages make a great PR tool.

Nintendo could have easily not shipped quite so many units to retailers in order to create an artificial scarcity; this has happened many times in the history of game hardware. But retailers want to have lots of units on hand to make sure they can maximize their sales, as they don't want sales going to some other retailer. Both the retailers and Nintendo were convinced there was plenty of demand, so Nintendo supplied the channel with as many 3DS units as they could. This time, though, the strategy has backfired. Sales slowed down dramatically in Japan after the opening week, and similar slowdowns have been reported in US retail channels.

The Nintendo DS family outsold the 3DS, with 460,000 units sold in March. Ouch. Certainly price point had a lot to do with this.

I'm already noticing more 3DS ads on TV, as Nintendo is probably ramping up to try and rescue the launch as much as they can.  Look for more PR about upcoming titles for the 3DS, and they may stage some events in May to go along with the eShop release, the Netflix functionality, and the free AT&T hotspots showing up. I expect Nintendo is pulling out all the stops it can so that E3 will be a success, not a disaster.

There are two E3 scenarios Nintendo must be looking at right now:

1) Everyone at E3 is wondering if Nintendo will be able to stop the hemorrhaging, as sales of the Wii and DS lines continue to drop and the 3DS continues to underperform. No big announcements at E3 have people wondering if Nintendo can ever recover.

2) Nintendo clearly wins E3, riding high on a resurgence of 3DS sales, the newly invigorated Wii sales after the May price cut, and an enthusiastic response to the announcement of new console hardware for 2012. Microsoft and Sony look old and busted as they plan to stick with their consoles for years to come, while Nintendo outstrips them with powerful new hardware and a slew of must-have product announcements.

I think Nintendo is gearing up for Scenario #2, after recent events have shown that Scenario #1 was looking more and more likely absent some dramatic moves on Nintendo's part. I think Nintendo would be wise to use everything in its arsenal right now: Price cuts on the Wii, more marketing efforts, key software announcements, and new console hardware on the way. If they really want to rule, try shipping the new hardware by Christmas 2011 instead of sometime in 2012 (though it would be difficult to get any third-party software for it on a short time-frame, unless it's been worked on for months already, which I doubt).

Wii 2 Rumors Explode

Probably not what the Wii 2 will look like.

It's all over the 'net today: Rumors about Nintendo's successor to the Wii. The Wii 2, Wii HD, or more probably, some other name entirely, has suddenly become a major topic on the game sites. The rumors point to some features: HD graphics output (a total no-brainer of a feature to add), and they are calling it more powerful than the Xbox 360 or the PS3. Which will be quite interesting, if true, since Nintendo has not been the horsepower leader in the marketplace since... well, it must be the N64 days back in the '90s. Raw horsepower can get expensive, though; will Nintendo really be willing to hit a high initial price point?


Supposedly the new console will be announced at E3 for a 2012 shipment, and it's being shown to industry leaders now. The new console is supposed to be backwards-compatible with the current Wii, and there will be a pre-announcement from Nintendo coming before E3. When queried, Nintendo gave its stock "We don't respond to rumors" answer. Check out the sources yourself here, here, and here.


This is NOT a coincidence, folks. Clearly Nintendo is finally letting a little rumor-mongering happen. They're floating a trial balloon, in a totally deniable way, to gauge reactions. It must have finally sunk in that Wii sales (and third-party support) are on an irreversible downward trend. Price cuts will definitely help boost sales, but at the expense of profitability. And even with a price cut to $149 (and eventually to $99) for the Wii coming (rumors say a price cut is coming in May) I don't see third-party support recovering. There are too many other places for publishers to invest their development dollars.

I'd say an E3 announcement of a 2012 release date for a Wii 2 might seem early, but it would be good for Nintendo to get some excitement rolling early. Perhaps they felt this was necessary given the less-than-stellar response to the 3DS in the marketplace. I think they were hoping the 3DS would be such a huge hit they could take their time with a Wii successor. Now that it's clear the 3DS will not, by itself, save Nintendo's profits, they are starting to leak out info about a Wii successor to generate some excitement about Nintendo again.


What are the chances for a Wii successor? It's difficult to really say how well a console might sell before you know little details like price, capabilities, and software... but certainly the Wii is way past its prime. The Xbox 360 and the PS3 are starting to look a bit long in the tooth, but both Sony and Microsoft would love to get a few more years of nice profits out of those consoles before they enter the maelstrom of new hardware again (and all the losses that implies for the manufacturers, plus the pain and suffering of developers trying to figure out how to use the half-baked tools for new consoles... I can hear the screams from here).


If Nintendo is really going for sheer graphics horsepower, it represents a change in their approach. Perhaps they couldn't think of an inexpensive add-on that was as powerful as motion-control has been for the Wii, and with that out of the picture they figured horsepower was the best bet. There are problems with choosing horsepower, though; pushing pixels and polygons gets expensive in terms of silicon. And as the number of polygons gets higher, the differences to consumers are less and less compelling. The difference between 1000 polygons and 10,000 polygons onscreen is huge; the difference between 10,000 and 100,000 is not as readily apparent; and the difference between 100,000 and 1,000,000 is something you have to look at carefully to see, and non-gamers would easily not see it.


In the past Sony would talk about things that weren't polygons to say why new, expensive hardware was worth the money... they used terms like Emotion Engine to say that games could now have emotional content because of the horsepower available. Did we ever see those? No, not really; developers found it far easier to build better graphics than to figure out how to make games more emotional. We are getting games that are more engaging, but it's a slow process. Most of the new horsepower in the latest consoles is devoted to better graphics, displayed faster.


So I think the horsepower route is a risky one for Nintendo, but they are in need of a boost right now. Sales are sagging, the 3DS has not set the world on fire, and their stock price is in the dumper. Perhaps some adroit rumor-mongering can bring it back up for them.